Question 1

Which of the following best describes the economic definition of technology in a firm?

Accepted Answer

The processes a firm uses to turn inputs into outputs of goods and services.

Question 2

Suppose a pizza restaurant can produce 600 pizzas per week with 4 workers and 2 ovens. If the total cost of producing 600 pizzas is $$3,400, what is the average total cost per pizza? Use the formula $$ATC = \frac{TC}{Q}$.

Accepted Answer

$$5.67$$

Question 3

Which of the following is an example of an implicit cost for a business owner?

Accepted Answer

Forgone salary from a previous job.

Question 4

If the marginal product of labor is increasing as more workers are hired, what happens to the marginal cost of output?

Accepted Answer

Marginal cost falls.

Question 5

Given the following costs for a firm: Fixed Cost (FC) = $$800, Variable Cost (VC) = 2$$,600, and Quantity (Q) = 600. What is the Average Fixed Cost (AFC)? Use $$AFC = \frac{FC}{Q}.$$

Accepted Answer

$$1.33$$

Question 6

Which of the following statements about the law of diminishing returns is correct?

Accepted Answer

At some point, adding more of a variable input to a fixed input will cause the marginal product to decline.

Question 7

A firm’s total cost is $$2,750 when producing 550 pizzas. If the fixed cost is 800$$, what is the variable cost? Use $$TC = FC + VC.$$

Accepted Answer

$$1,950$$

Question 8

Which of the following best explains why the average total cost curve is U-shaped?

Accepted Answer

Because marginal cost first falls due to specialization, then rises due to diminishing returns.

Question 9

If a firm’s marginal cost is above its average total cost, what will happen to the average total cost as output increases?

Accepted Answer

Average total cost will increase.

Question 10

In the long run, which of the following is true about a firm’s costs?

Accepted Answer

All costs are variable.

Question 11

A car company can produce 200,000 cars per year at an average cost of $27,000 per car, but producing 400,000 cars per year does not lower the average cost further. What is this situation called?

Accepted Answer

Constant returns to scale

Question 12

Which of the following is NOT a reason why firms may experience economies of scale?

Accepted Answer

Increasing fixed costs as output increases.

Question 13

If the marginal product of labor is less than the average product of labor, what happens to the average product of labor?

Accepted Answer

It decreases.

Question 14

Suppose Jill’s pizza restaurant experiences a negative technological change due to a hurricane damaging her ovens. What is the likely effect on her production function?

Accepted Answer

She can produce less output with the same inputs.

Question 15

If a firm’s total cost of producing 625 pizzas is $$4,050, what is the average total cost per pizza? Use $$ATC = \frac{TC}{Q}$.

Accepted Answer

$$6.48$$

Question 16

Which of the following best describes diseconomies of scale?

Accepted Answer

Long-run average cost rises as output increases.

Question 17

A firm’s opportunity cost of producing a good includes which of the following?

Accepted Answer

Both explicit and implicit costs.

Question 18

If the average variable cost (AVC) of producing 600 pizzas is $$4.33, and the average fixed cost (AFC) is 1.33$$, what is the average total cost (ATC)? Use $$ATC = AVC + AFC.$$

Accepted Answer

$$5.67$$

Question 19

Which of the following is a real-world example of a positive technological change?

Accepted Answer

A factory replaces old machines with faster, more efficient ones.

Technology, Production, and Costs: Microeconomics Study Guide

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